The Group Insurance Board (GIB) met May 24 and considered options for the 2018 state employee group health insurance program if their proposal to move to a self-funded structure is not approved by the Legislature.
In February, the GIB had approved moving forward with a self-funded model for 2018, under an estimate that it would result in savings of $40 million per year, or $60 million in the upcoming biennium. The Governor included the $60 million expenditure reduction in his budget proposal.
Under statute, the Joint Committee on Finance has the authority to approve the contracts. In early May, GIB had sent to the Joint Committee on Finance the proposed contracts for self-funding, and on May 16 the Committee notified the GIB and Department of Employee Trust Funds (ETF) it would schedule a hearing to consider the contracts.
At the May 24 meeting, ETF staff recommended the GIB consider instead a regional structure under a fully–insured model, a move the Board could make without legislative approval. After much discussion Board members determined that an official vote was not required and instead deferred saying they wanted to “send a message to the Legislature” that self-funding is still their preferred option.
GIB members were concerned after a presentation from Segal Consulting, the firm that developed the self-funded proposal. ETF staff had asked Segal to estimate premiums for 2018 if the state were to remain under its fully insured model rather than move to a self-funded model.
Segal projected that health insurers would request a 10.4 percent increase in premium for 2018. Segal also projected that to achieve the $60 million in savings if the state did not move forward with self-funding, employee premiums would have to increase by 50 percent, or deductibles would have to increase by $1,000 for single coverage and $2,000 for family coverage.
Given that the initial premium bids from health insurers would not be due to ETF until the end of June, whether the Segal projection is accurate remains to be seen. Over the last five years, the average premium increase has been just 2.5 percent.
Segal said the good news is that the 2016 experience shows a decrease in claims costs from the prior period. However, Segal staff also said that tremendous pressure is on the health insurers as the 2017 projected medical loss ratio for the program is 96 percent. This means that based on the current premiums and benefit structure, health insurers in the program are expected to pay 96 percent of the revenue they receive on the program back out in health care costs. The remainder—4 percent—is what is left for administration, including profit.
ETF staff said it would move forward to obtain information on all models—the fully insured model, regionalization, and self-funding—to ensure some structure for the state employee health care program is ready to go for 2018. The next GIB meeting is currently scheduled for August 30.